Government to cut costs via pension age

A pensions think tank has estimated that the pensions age, currently at 65, will have to rise to 72 for the Government to keep their costs at the same level as ten years ago.

The Pensions Policy Institute compiled a report that was submitted to the Department of Work and Pensions with a view to reviewing the State Pension Age.

In the report, they said that workers retiring at the same age as workers in the decades before is costly and unfair as people are living much longer lives than in years gone by. The PPI also noted that people with low incomes tend to live shorter lives than the wealthy, and so they should receive a larger state pension.

The basic state pension currently stands at £97.65 per week, with men receiving a pension at 65 and women at 60. The previous Labour Government planned to have the ages meet in the year 2020, and then go up to 68 by 2046.

However now that a new Government is in place pension schemes are set to change. The Coalition Government is seeking advice from the PPI and other think tanks and is interested in raising the national pension age for men to 66 by 2016, and women in 2020. Other changes include scrapping the Default Pension Age of 65 completely in 2011.

According to the PPI these changes could save the cash-strapped government up to £3.5 billion per year as HMRC would claim more tax from people who would continue working and at the same time would spend less money giving out benefits.

Of course state pensions are not the only option, offshore pension transfers such as QROPS pension plans come with many benefits. To learn more consult our pensions and retirement planning section.